Home Depot (NYSE: HD) is a Dividend Contender, and its stock is being accumulated. Dividend Contenders are stocks that have increased their dividends for a sufficient number of years to be on track for inclusion in the Dividend Aristocrats Index. Inclusion requires membership in the S&P 500 and 25 years of annual increases, a figure Home Depot will achieve in 2031.
The critical detail is that including it in the Dividend Aristocrats Index significantly increases its ownership, as ETFs and funds pegged to it will have to buy, and, more importantly, among long-term buy-and-hold investors. Increased ownership among buy-and-hold investors is known to reduce market volatility, ultimately enhancing total returns over time. The dividend provides an annual yield of 2.5%, with shares trading close to $380, and the payout ratio remains a sustainable 60% of the projected earnings.
